Money Matters- Lessons to Teach your Kids about Money- Saving, Spending and Donating

Green makes the world go round.  It seems more than ever before, many kids today do not understand how parents make money, how they decide to spend, save, donate and invest their money or how they have to allocate the household income.  To many kids money is just a means to an end.  They want something and they need money to get what they want.  With the prevalence of television, computers, radio and peer-pressure present in a majority of kids daily lives, children are bombarded by more and more commercials and messages to consume more and more material possessions than ever before.  And many parents give in and buy their kids many of the possessions their kids beg them for.

 I believe the perfect time to teach your kids about money begins when they are very small. Start when they are as young as 2 to 3 years old. Of course for a very little child, they can only comprehend a little bit about money, but it is your actions that are important at this age.

Decide what messages you want to teach your child when they are older, such as, you have to make smart choices about how you spend your money; you have to budget so you have enough money for rent, food, a car, gas, utilities, savings, and spending money. Although your kids may be very young and you might think you do not have to think about money talks yet, this is when to start the foundation that you will build upon for when they get to be pre-teen and teens.

Teach your kids:

  • to Save, Donate, and Spend Money Wisely
  • to Make Smart Decisions about How to Spend Their Money
  • about Working Hard to Make Money
  • how you Allocate Money to Live in a House, Buy Food and Clothing, Have a Car and Gas
  • how to be Patient to Purchase Something and Discourage an Attitude of Instant Gratification
  • they must contribute at home by doing chores and allowance is a privilege not a right

Let Your Kids Save, Donate and Spend Their Money

One of the best articles I have read about teaching your young kids how to save, donate and spend money by putting money in jars each time they get their allowance or other money is at Parenting.com- Click here to go to the article.

Use Trips to the Store as a Time to Talk About Money

When you go to the store to buy groceries or even a seasonal purchase, like outdoor furniture, use those times to talk about the money you are using. Explain to your kids that you, or you and your spouse, or your spouse works to make enough money to buy groceries and pay for the house, and so on. When it is a purchase like outdoor furniture explain how you have been saving to buy the furniture in time for Summer or that you received a bonus and have extra money to purchase something you need for the house.

Tell Them Every Dollar You Spend Has to be Earned or Made

Explain that even you (or Mommy and Daddy or Grandma, or caregiver) have things you would like to buy but you wait until you have saved enough money or until you have invested first. Let them know they are not the only one who would like to have a toy or new dress or video game, but that you do not need it. Use your spending habits as a way to talk about money in simple terms.

It can be difficult for kids to understand how we get money. They only see us spend money or use a credit card to get things. It does seem very easy. Show them how it works. Once they are old enough let them try their hand at making money. Let them sell lemonade and cookies at a yard sale or let them have a table of their belongings they sell during a yardsale. You could take some of their toys to a Second Hand Kids store that buys items and let them have the money to see that you get money for items sold and you pay money to buy items. Or pay them a penny for every acorn or pinecone they pick up in the yard, or some relatively easy job that lets them see it takes work to make money but you can make enough money to save and spend it on something you want.

Show Your Kids How Your Household Allocates Money

Once your kids are entering Kindergarten, you can begin telling them in simple terms how your money is spent. There are several websites that show you a general household budget but if you just draw a simple pie chart and cover up the different parts or use blocks stacked to show how much money you have each month and where the money goes and what is left for emergencies and special purchases. I would also recommend letting your kids know that everyone in the family has a special budget (however small) that will be used to do fun things, like eat out, go to the zoo, buy a new outfit or special item and anything that goes beyond that amount will not be bought this month. That way, as you spend the discretionary funds each week, you can ask the kids - would you rather get ice cream or save the money for a special item you pick out at the end of the month.

Stop Shopping Tantrums Cold Turkey

If you have kids that are already taking advantage of you every time you have them with you when you shop for groceries or run errands it is time to show them how to be patient and stop the tantrums as they demand you buy them something. You need to discourage an attitude of instant gratification by changing your behavior. Each time you buy something for your child at the store, even if it is small, you are sending them a message that they get to buy something when they come shopping. Once you do it 2 to 4 times in a row they feel entitled to something, even if it is something small, every time they go to the store. Decide what the rules are ahead of time and stick to them for that type of trip.

I would recommend talking with you child before going into the store and explain why you are going to the store and what you are buying (groceries, medicine, housewares, a present for someone else, etc...). Explain to your child you are not buying them anything (unless you are planning to do so) and do not change your mind in the store because you will pay for it next time. After a few consistent conversations and actions from you, they will stop whining about getting something. Of course, you should bring an activity to occupy them or have them help you locate the needed items or play a game with them so their focus is on something other than all the things they want. It is also okay to tell them they can look and think about how they will spend their saved money once they have enough to buy their favorite item. Once again, it is about teaching patience and that we cannot get everything we want right when we want it.

Household Chores are Expected and an Allowance is Given to Help Them Use Money Wisely

I think it is important for kids to understand that it is a privilege to get an allowance and you can take it away at any time for poor behavior or any other parental reason. I think it is also important that they understand you expect everyone in the house to help with chores and other work around the house. They do not get more money for extra work that is needed but, instead, the allowance is for their overall efforts and behavior. Personal chores are only part of the effort and expectations. I have found that even a 5 year old can start to think they should get paid for every little thing if you are not careful with how you explain their allowance and why they get it.